May 2012
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Global Trader Newsletter
In This Issue
EXPORT NEWS
OFAC Issues Syria General License 4A
OFAC Posts Recent Penalty Information
GAO Issues Report on Export Compliance
OFAC's Licensing Division Changes Its Case Numbering System Format
BIS Adds New ECCN to CCL
BIS Reminds US Firms of Requirement to Report Contracts for Sale of Defense Items to Foreign Entities
Census Updates AES License Code C32
CUSTOMS NEWS
U.S.-Colombia Trade Promotion Agreement Takes Effect May 15, 2012
U.S.-Korea Free Trade Agreement Enters Into Force on March 15, 2012
CBP Seeks Comments on Customs Country of Origin Marking Requirements for Containers/Holders
Calendar of Events
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The import/export highlights from March & April include: OFAC posting recent penalty information; GAO issues report on export compliance; OFAC issues Syria General License 4A; OFAC's licensing division changes its case numbering system format; BIS adds a new ECCN to the CCL; BIS reminds U.S. firms of the requirement to report contracts for sale of defense items to foreign entities; Census updates AES license code C32 requirements; U.S.-Colombia and U.S.-Korea free trade agreements go into effect; and CBP seeks comments on CBP country of origin marking requirements for containers & holders.

As always, thank you for reading!
 
Jennifer Kessinger, Tammie Krauskopf
& Ruta Riley
globaltradeexpertise
[email protected]
Export News

OFAC Issues Syria General License 4A  

Syria flag
On April 27, 2012, the Office of Foreign Assets Control (OFAC) has issued General License 4A(GL 4A), which authorizes the exports or reexports to Syria of certain items and services authorized by the Department of Commerce.  General License 4A replaces and supersedes General License 4, dated August 18, 2011.

GL 4A permits the exportation or reexportation of items to Syria from the U.S. or by a U.S. person, including the Government of Syria, whose property and interests in property were blocked either by the Syrian Sanctions Regulations or one of the pertinent executive orders (the Blocked Person), provided that the exportation or reexportation of such items to Syria is licensed or otherwise authorized by the Department of Commerce.

GL 4A also permits from the U.S. to Syria the exportation and sales of services that are ordinarily incident to the exportation or reexportation of items to Syria, or of services to install, repair, or replace such items, is authorized, as long as the exportation or reexportation of such items to Syria is licensed or otherwise authorized by the Department of Commerce.

However, the note to GL 4A provides that the general notice does not authorize the exportation or reexportation of any item not subject to the Export Administration Regulations (EAR), or of related services.

OFAC Posts Recent Penalty Information

Treasury Seal
On April 25, 2012, OFAC reported that Sandhill Scientific, Inc. (Sandhill) of Highlands Ranch, CO, a U.S. manufacturer of medical equipment, has agreed to remit $126,000 to settle allegations that it violated the Iranian Transactions Regulations (ITR) in May 2007 and OFAC's Reporting, Procedures and Penalties Regulations on separate occasions in May and July 2008. Specifically, OFAC alleged that on May 4, 2007, Sandhill exported medical equipment valued at $6,700 to Dubai, UAE, with knowledge that the goods were intended for transshipment to a company in Iran with which Sandhill had an exclusive distributor agreement. OFAC also alleged that Sandhill failed to provide documents responsive to two administrative subpoenas issued by OFAC during its investigation.

Sandhill did not voluntarily disclose the matter to OFAC. OFAC determined that the alleged ITR violation constituted an egregious case because Sandhill's unlicensed export appears to have resulted from willful and reckless conduct in which the company's management was directly involved; Sandhill appears to have deliberately concealed the fact that the goods were destined for Iran; and Sandhill did not fully cooperate with the investigation. These determinations resulted in a base penalty amount of $250,000 for the alleged ITR violation.

The settlement amount reflected the fact that Sandhill did not appear to have any compliance program in place at the time of the alleged violations; Sandhill did not appear to have taken any remedial action after the alleged violations came to its attention; the export may have been eligible for an OFAC license under the ITR; and OFAC had no record of any prior sanctions enforcement actions against Sandhill.  

On April 10, 2012, OFAC reported that Essie Cosmetics Ltd. (Essie) and its former individual corporate officer (Officer), of New York City, NY, have agreed to settle OFAC allegations involving Essie and the Officer's unlicensed exports to Iran in violation of the Iranian Transactions Regulations (ITR). The apparent violations pertain to Essie and Officer's knowing sale and export of nail care products on September 17, 2009, December 8, 2009 and February 23, 2010, to an Iranian distributor. Essie and the Officer did not voluntarily self-disclose the apparent violations and that the violations constituted an egregious case. The total transaction value for the three transactions settled with OFAC was $33,299, and the based penalty was $750,000. Essie, the Officer and OFAC agreed to settle in the amount of $450,000. The settlement amount reflected the fact that Essie and the Officer had no history of prior OFAC violations and have cooperated with the investigation.

GAO: "U.S. Agencies Need to Assess Control List Reform's Impact on Compliance Activities"    GAO Seal

On April 23, 2012, the U.S. Government Accountability Office (GAO) issued a report that outlines research results on: (1) the activities by the U.S. export control agencies (Agencies) to address transshipment risk and (2) the extent to which U.S. agencies assessed the impact of export control reforms on the resource needs for compliance activities. GAO analyzed U.S. licensing data for 13 transshipment countries and visited Hong Kong, Singapore, and the United Arab Emirates. (Report highlights can be found here.)

GAO's report states that the Agencies use various compliance activities to prevent the diversion or misuse of exported items against U.S. interests or allies and reduce illicit transshipment risk, such as vetting transactions prior to export, analyzing shipping data and monitoring the end use of items, and educating companies and foreign governments about illicit transshipment risks.

GAO found that, "[The] Agencies have not fully assessed the potential impact that control list reforms may pose for the resource needs of their compliance activities. Agencies estimate that Commerce will receive between 16,000 and 30,000 additional license applications as a result of proposed reforms to move less sensitive items from State to Commerce. Agency documents state that this step would allow them to focus resources on items most critical to national security and may make compliance easier for exporters because Commerce imposes fewer requirements than State's controls. However, Commerce has not assessed the impact this added responsibility would have on its end-use check resource needs. Also, under the reforms, fewer items may require export licenses, thereby reducing uncertainty as to whether export sales will be approved. Some agency officials suggested potential risks, such as an increased need for more end-use checks and the loss of information from reviewing exports through the licensing process prior to export. The agencies have not yet assessed the impact of these potential risks on their resource needs."

Based on the report findings, GAO recommends that Commerce and State should assess the potential impact of control list reforms on the resource needs of their compliance activities.

OFAC's Licensing Division Changes Its Case Numbering System Format

    

Treasury SealOn April 16, 2012, the Office of Foreign Assets Control (OFAC) announced that the numbering system used by the Licensing Division has been changed and is being reflected in new licenses, denial letters, and other correspondence issued after March 26, 2012.  As was previously the case, the new numbering begins with alphabetical characters designating the sanctions program - e.g., CU, IA, or SU.  The new number is followed by (1) the calendar year, (2) a unique six-digit number, and (3) a final number denoting original or amendment.  Thus, a new license issued pursuant to the Cuban Assets Control Regulations would bear a number styled as License No. CU-2012-XXXXXX-1, while a license issued pursuant to the Iranian Transactions Regulations would appear as License No. IA-2012-XXXXXX-1.
 
OFAC states that, for the time being, the old licensing case numbering system will not disappear completely.  An amended version of a license that was originally issued prior to March 26, 2012, will continue to follow the original license case number system, i.e., alphabetical characters for the sanctions program followed by the existing license number and an alphabetical character, as in the past.

BIS Adds New ECCN to the Commerce Control List

    

BISOn April 13, 2012, the Bureau of Industry and Security (BIS) published a final rule in the Federal Register that amends the Export Administration Regulations (EAR) by adding a new Export Control Classification Number (ECCN) series, 0Y521, on the Commerce Control List (CCL) and makes corresponding changes to the EAR.

The final rules provides that the new ECCN 0Y521 series will be used for items that warrant control on the CCL but are not yet identified in an existing ECCN. As BIS explained in the proposed rule issued on July 15, 2011 (76 FR 41958), this new temporary holding classification is equivalent to United States Munitions List (USML) Category XXI (Miscellaneous Articles), but with a limitation that while an item is temporarily classified under ECCN 0Y521, the U.S. Government works to adopt a control through the relevant multilateral regime(s); to determine an appropriate longer-term control over the item; or determines that the item does not warrant control on the CCL.

Items will be added to the 0Y521 ECCNs by the Department of Commerce, with the concurrence of the Departments of Defense and State, when it identifies an item that should be controlled because it provides a significant military or intelligence advantage to the United States or because foreign policy reasons justify such control.

BIS Reminds U.S. Firms of Requirement to Report Contracts for Sale of Defense Items to Foreign Entities

    

BISOn March 20, 2012, the U.S. Bureau of Industry and Security (BIS) issued a reminder in the Federal Register that U.S. firms are required to report annually to the Department of Commerce (Commerce) information on contracts for the sale of defense articles or defense services to foreign countries or foreign firms that are subject to offsets agreements exceeding $5 million in value. U.S. firms are also required to report annually to Commerce information on offsets transactions completed in performance of existing offsets commitments for which offsets credit of $250,000 or more has been claimed from the foreign representative. This year, such reports must include relevant information from calendar year 2011 and are due to Commerce no later than June 15, 2012.

Census Updates License Code C32

    

CensusOn March 12, 2012, the Census Bureau announced that effective immediately,  the classification EAR99 is no longer accepted in the Export Control Classification Number (ECCN) field in the Automated Export System (AES) when the filer selects License Code C32 - "No License Required."

If EAR99 is the classification of the item and the transaction is designated as "No License Required" (NLR), the filer should use License Code C33, which is for EAR99 items designated as NLR and items under ECCNs having a reason for control of Anti-Terrorism only.

The Bureau of Industry and Security (BIS) requires a 5-position ECCN from the Commerce Control List (CCL) when License Code C32 is reported. The License Code C32 is for an item under the designation NLR having an ECCN with a reason for control other than or in addition to Anti-Terrorism. The classification EAR99 does not meet this criteria and therefore cannot be reported under License Code C32.
Customs News 

US-Colombia Trade Promotion Agreement Takes Effect May 15, 2012

 

U.S. Colombia FlagsOn April 15, 2012, the USTR announced that the U.S.-Colombia Trade Promotion Agreement(CTPA) will take effect on May 15, 2012. This announcement follows completion of work by the United States and Colombia to review each other's laws and regulations related to the implementation of the Agreement, as well as Colombia's steps to fulfill the Action Plan Related to Labor Rights. In preparation for the agreement, the United States Trade Representative Ron Kirk exchanged letters with officials from the Government of Colombia in which each country confirmed that it had completed its applicable legal requirements and procedures for the Agreement's entry into force.

Ron Kirk expects that "This agreement will provide American businesses, farmers and ranchers with significantly improved access to the third largest economy in South America. One month from today, the value of the U.S.-Colombia trade agreement will begin to be seen in lower tariffs on autos, consumer goods, agricultural commodities, machinery, and other exports from the United States, which will make our goods more competitive in the Colombian market. That means support for well-paying jobs at home."

On May 15, 2012, over 80% of U.S. exports of consumer and industrial products to Colombia will become duty-free, including agricultural and construction equipment, building products, aircraft and parts, fertilizers, information technology equipment, medical scientific equipment, and wood. In addition, immediately more than half of U.S. exports of agricultural commodities to Colombia will become duty-free, including wheat, barley, soybeans, high-quality beef, bacon, and almost all fruit and vegetable products.
The CTPA is said to provide significant new access to Colombia's $180 billion services market: Colombia agreed to eliminate measures that prevented firms from hiring U.S. professionals, and to phase-out market restrictions in cable television.

The U.S.-Korea Free Trade Agreement (UKFTA) Enters into Force March 15, 2012  

 
U.S.-Korea FlagsOn March 15, 2012, the United States Trade Representative (USTR) announced that the U.S.- Korea Free Trade Agreement (KORUS FTA) entered into force in the U.S. for goods entered, or withdrawn from warehouse for consumption, on or after March 15, 2012. The agreement is said to be the U.S.' most commercially significant free trade agreement (FTA) in almost twenty years. The U.S. International Trade Commission (ITC) estimates that the reduction of Korean tariffs and tariff-rate quotas on goods alone will add $10 billion to $12 billion to annual U.S. Gross Domestic Product and around $10 billion to annual merchandise exports to Korea.

Under the FTA, almost 80% of U.S. exports to Korea of consumer and industrial products became duty free on March 15, 2012, and nearly 95% of bilateral trade in consumer and industrial products will become duty free within five years of March 15, 2012.  Most remaining tariffs will be eliminated within 10 years.

For agricultural products, KORUS FTA eliminated or will phase out tariffs and quotas on a broad range of products, with almost two-thirds (by value) of Korea's agriculture imports from the United States becoming duty free upon entry into force.

For services, the FTA will provide meaningful market access commitments that extend across virtually all major service sectors, including greater and more secure access for international delivery services and the opening up of the Korean market for foreign legal consulting services.

In the financial services area, the FTA will increase access to the Korean market and ensure greater transparency and fair treatment for U.S. suppliers of financial services. The FTA will address nontariff barriers in a wide range of sectors and includes strong provisions on competition policy, labor and environment, and transparency and regulatory due process.

CBP Seeks Comments on Customs Country of Origin Marking Requirements for Containers or Holders   

CBP Seal
On April 16, 2012, U.S. Customs and Border Protection (CBP) of the Department of Homeland Security posted a notice in the Federal Register seeking comments on the Country of Origin marking requirements for containers or holders.  CBP would like submitted comments to address one of the following four points:

    (1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency/component, including whether the information will have practical utility;
    (2) Evaluate the accuracy of the agencies/components estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
    (3) Enhance the quality, utility, and clarity of the information to be collected; and
    (4) Minimize the burden of the collections of information on those who are to respond, including the use of appropriate automated, electronic, mechanical, or other technological techniques or other forms of information.

Written comments to the Office of Information and Regulatory Affairs, Office of Management and Budget are due no later than May 21, 2012.

Calendar of Events
Upcoming Trade Events & Seminars

datebookOur website has a comprehensive listing of import and export conferences held throughout the country, as well as Customs training, EAR training, ITAR training, and other training. Below is a small sampling of what's available in the coming months:


Complying with U.S. Export Controls - Bureau of Industry and Security
June 14 - 15, 2012 - Seattle, WA - $445

25th Annual Update Conference on Export Controls & Policy - Bureau of Industry and Security
July 17-19, 2012 - Washington, DC

Complying with U.S. Export Controls - Bureau of Industry and Security
August 8 - 9, 2012 - Universal City, CA - $450

How to Develop an Export Management and Compliance Program - Bureau of Industry and Security
August 29 - 30, 2012 - Dallas, TX - $446



Who's Hiring?
A Summary of Current Trade Job Opportunities

hand signing formAs a service to the international trade community, Global Trade Expertise compiles links to trade job opportunities from many different sources. New trade job listings are posted frequently on our website.

To sort the job opportunities by region, fields, or levels, click on the appropriate category or tag in the right column on our Trade Jobs webpage.

Thanks again for your interest in our newsletter!
 
Sincerely,
 
Jennifer Kessinger, Tammie Krauskopf & Ruta Riley
Attorneys & Consultants

Tel. 925.876.1381 (Jennifer Kessinger)

[email protected]

Tel. 708.707.4087 (Tammie Krauskopf)

[email protected]
Tel. (630) 862-8123

www.globaltradeexpertise.com
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